Your first year of running a new business will chart a steep learning curve. No matter how careful or knowledgeable you try to be, mistakes will happen. Get used to the idea.
Still, if you keep an open mind and heed voices of experience, you can dodge many of the more common missteps. Here are the seven most frequent mistakes that newbies make with business startups, and some advice about how to jump the potholes.
Mistake 1: Driving a fire engine without a route. You always hear how entrepreneurs need "passion" to succeed, the so-called fire in the belly. Well, enthusiasm can be overrated. To fan startup flames, you need more than high energy. You need a plan.
Take the time to thoroughly investigate your market and target customers, the competition and other basics, with a sound business model. Focus on answering one deceptively simple question: How will you make money?
As a case study in errors, Tim Berry, president of Palo Alto Software, points to the ubiquitous DVD and video rental store on the corner, the one we've all seen open and shutter in record time. Typically, some starry-eyed owner rents the space upfront. Now he's got fixed monthly overhead well before opening. He then spends his capital on snazzy design, forgetting about the cost of cash registers, business software and store signage.
When it's time to stock the shop, the owner is tapped out. The shop opens with trendy decor and lousy inventory. There's not one penny for marketing.
Before the year is out, the store "is picked up by a chain that knows what it's doing," says Berry.
Lesson: Don't quit your day job without a plan.
Mistake 2: Selling way too cheap. Ask a child to choose between 12 rhinestones and one diamond and she'll go for the rhinestones every time. Startup owners are just like that. They fall for the fallacy of quantity over quality. They figure rock bottom prices will fuel skyrocketing sales and they'll become millionaires. But it doesn't work that way.
"New entrepreneurs are notorious for pricing their goods and services too low," says Linda Hollander, author of Bags to Riches, a small-business handbook for women. "This dooms them to a life of always worrying about money. Heck, even when they get orders, they aren't happy because they aren't making enough profit on their sales."
Before pricing products, do the math.